In Case You Missed It

Contact:
Press Office
(202) 226-9440

White House Considers Awarding ObamaCare Subsidies, Intended for the Uninsured, to Labor Unions

WASHINGTON, D.C. | August 30, 2013

By Avik Roy

A few weeks ago, I discussed the fact that labor unions have been increasingly vocal about their objections to certain provisions of the Affordable Care Act. Obamacare will “shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class,” wrote three labor leaders in July. Now, according to a report from InsideHealthPolicy, the Obama administration is considering offering insurance subsidies—intended for the uninsured—to labor union members who already have employer-sponsored coverage.

The issue at hand is the way Obamacare affects multi-employer health plans, also known as Taft-Hartley plans. These plans consist of employer-sponsored health insurance that is arranged between a labor union in a particular industry, such as restaurants, and small employers in that sector. Approximately 20 million workers in the United States are covered under such arrangements, including 800,000 of the 1.3 million members of the United Food and Commercial Workers International Union, whose leader, Joseph Hansen, signed the letter I described above.

Workers with employer-sponsored coverage don’t qualify for subsidized coverage on Obamacare’s insurance exchanges. Those subsidies are designed for low-income people who aren’t offered coverage from their employers, and have to shop for insurance on their own. But the labor union leaders want those subsidies to also apply to their members with employer-sponsored coverage, even though they already get those benefits tax-free due to the employer tax exclusion for health insurance.

Now, according to Rachana Dixit of InsideHealthPolicy, the administration is “working on regulations to address the issue” that people covered under Taft-Hartley plans aren’t eligible for subsidies. But it’s not an “issue” in the sense of being a glitch or a mistake; union leaders are seeking special treatment, and additional taxpayer subsidies, that other participants in employer-sponsored coverage don’t get.

“Democratic aides and sources off Capitol Hill say conversations about unions’ concerns are ongoing, and they say that the administration is working on regulations to address the issue,” Dixit writes. “But, it is not clear if the proposed Department of Labor rule” would satisfy unions’ concerns. “Separately, House Minority Leader Nancy Pelosi [D., Calif.] said to union members earlier this month that she was still working to resolve their concerns about the law, particularly on the Taft-Hartley plan issue.”

Richard Trumka, president of the AFL-CIO, confirmed to Alexis Simendiger of RealClearPolitics that “fixes” to the law were a “topic of conversation among top labor leaders and senior White House officials this week.” “We were talking about health care, and we’ll continue to talk about health care to try to solve problems,” said Trumka. Trumka, James Hoffa, chief of the International Brotherhood of Teamsters, and other labor leaders met with President Obama’s chief of staff, Denis McDonough, on Tuesday.

However, it’s not clear what the White House can unilaterally do to address unions’ concerns. The text of the Affordable Care Act is straightforward; if you have gained coverage through an employer-sponsored health plan, you’re not eligible for subsidized coverage in the exchange, because you already get a subsidy through the tax code: you don’t pay income or payroll taxes on the value of your health coverage.

If, suddenly, the 20 million people on Taft-Hartley plans were eligible for subsidies, Obamacare’s costs would skyrocket. If half of those Taft-Hartley enrollees gained $5,000 per year in tax credits along with their tax-free health benefits, we’re talking $50 billion a year in additional insurance subsidies for those individuals. That’s more than half a trillion dollars over ten years, accounting for health inflation.

I would say that it’s inconceivable that the White House would seek to impose such a “fix” to Obamacare without the consent of Congress. But, given the other changes that the administration has made to the health law—of similarly questionable legality—we can’t rule anything out.